KUALA LUMPUR (Aug 28): The validity of Malaysia Airlines Bhd’s air operator certificate (AOC) has been reduced from three years to one year after a probe into the technical issues the state-owned carrier faced recently, according to Transport Minister Anthony Loke.

This was done by the Civil Aviation Authority of Malaysia (CAAM) to ensure that the airline complies with the mitigation plan that was announced by its parent company Malaysia Aviation Group Bhd on Saturday to address flight disruption issues that was identified by CAAM during its June 24-28 audit.

CAAM's audit had revealed significant problems involving mechanical components and a shortage of skilled maintenance personnel, Loke said at a news conference on Wednesday.

MAG's mitigation plan includes enhancing aircraft security, aggressive recruitment of skilled workers, reducing reliance on third-party maintenance, repair and overhaul or MRO services, and securing a reliable supply of engine spare parts from original equipment manufacturers.

Loke said MAG has been instructed to submit a monthly report on the implementation status of its mitigation plan.

Meanwhile, he expressed confidence about MAG's financial position despite its plan to cut Malaysia Airlines’ network for the rest of the year, which is expected to impact revenue.

MAG said the scaling down of the airline's network until December is to facilitate the implementation of corrective measures due to increasing pressure from passengers over recent flight disruptions.

"Definitely there will be a financial impact, and revenue will be affected by cutting down operations. But I believe they are still in a good financial position," Loke said.

Regarding the need for additional financial support from MAG's sole shareholder, Khazanah Nasional Bhd, Loke said this will depend on MAG's management, saying the matter does not fall under the Ministry of Transport's purview.

The government has instructed MAG to take all necessary steps to restore public confidence in Malaysia Airlines' safety, said Loke.

"MAG must ensure that all aircraft are in optimal condition. We will not take any chances; the safety of passengers and crew is always our top priority, regardless of the costs or revenue," Loke stressed.

MAG reported a net profit of RM766 million in FY2013, marking its first annual profit since the group was formed following the privatisation of Malaysia Airlines in 2014.

According to Shukor Yusof, founder and analyst of aviation research firm Endau Analytics, MAG’s decision to reduce its network could result in a huge loss for the airline group in the financial year ending Dec 31, 2024 (FY2024).

“How much losses MAG will incur remain unclear at this stage, but a back-of-the-envelope calculation suggests this could be in the hundreds of millions of ringgit. This means MAG will end its financial year deep in the red, despite having been cash-positive for much of this year,” he said in a LinkedIn post on Monday.

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